Indiana CHAPTER 7 Bankruptcy FAQ

If you are considering filing for bankruptcy in Indiana, you will no doubt have many questions. Bankruptcy can be very confusing, and you may wonder if it is the right option for you. Although looking online is a great place to start searching for answers to your bankruptcy questions, there is no substitute to consulting with an attorney who can answer your specific questions that are applicable in your particular situation.

Indiana Attorney Answers Frequently Asked Bankruptcy Questions

Contact the law firm of Steven P. Taylor, P.C. at (317) 271-1111 for a consultation about the questions or concerns you have about bankruptcy. Attorney Steven P. Taylor is knowledgeable and experienced with Indiana’s bankruptcy laws, and will answer your questions and help you decide if filing for bankruptcy is right for you. Call Steven P. Taylor today if you have questions or concerns about bankruptcy throughout the areas of Central Indiana.

The most immediate effect of any bankruptcy is the Automatic Stay. The automatic stay is a court order that takes effect on the moment you petition for bankruptcy protection. It bars all of your creditors from taking actions to collect on their debts, unless and until they get permission from the court. They cannot repossess your car. They cannot foreclose on your house. They cannot garnish your wages. They cannot levy your bank account. They cannot have have debt collectors call you at dinnertime and make ignorant comments about you. The stay is a thing of beauty. Even though a stay stops creditors from taking collection action, you may still need to make payments on some debts in order to keep the creditor from being able to get a court order, called Relief from Automatic Stay, to let them resume collection. The second thing bankruptcy does is get rid of your debts. This is called discharge.

When you file any bankruptcy case, the court enters an order of automatic stay, which essentially means that upon filing the petition, creditors, including the IRS, collection agents and attorneys, etc, are restrained from trying to collect their debts, repossess property, or foreclose. Simply put, they cannot send you insulting or threatening collection letters, call you on the phone, sue, garnish your wages, repossess a car, foreclose on your home, or do any other act to collect on the debt. If your wages are already being garnished, the garnishment must stop commencing the pay period on or after the date of filing. If a creditor continually ignores the restraining order, you may bring a contempt of court action against the creditor not only to make him stop, but also for the court to fine him, for costs and fees, and for damages caused by the violation of the automatic stay.

A reaffirmation is an agreement you enter into with a creditor, in which you make a new promise to pay a debt. It is always voluntary agreement by you and the creditor. There are three main reasons for wanting to enter into a reaffirmation: (1) you feel a desire to repay the debt; (2) you want to keep your credit line with that creditor; (3) you want to keep the merchandise which that creditor has a PMSI interest in. In the first two cases, the reaffirmation will usually be for the full amount of the debt you owe to the creditor. In the third case, you will often only want to reaffirm that part of the debt secured by the fair market value of the merchandise. A reaffirmation agreement will usually include terms for continued monthly payments and specify an interest rate. NOTE: BOTH YOU AND THE CREDITOR MUST AGREE TO THE REAFFIRMATION AGREEMENT. IT IS VOLUNTARY.

If you sign a Reaffirmation Agreement with the lender where you agree to pay the debt to the lender, you lose your discharge of the obligation to that lender. Thereafter, if the payments are made pursuant to the terms of the contract. If however, the payment(s) are missed, the lender can file suit against you and obtain a judgment for money against you. Thereafter, they can record the judgment; garnish your wages, etc to satisfy the judgment. If you are behind in your payments to the lender when you file bankruptcy, you have several options. The first is to pay the fair market value of the vehicle in cash (This is called a redemption) and get your Title. Second you can reaffirm the debt and continue making the payments over time.

The Bankruptcy Code provides that persons who enter into bankruptcy are entitled to keep certain of their assets. The trustee is charged with gathering all of the assets of the person who files bankruptcy and to sell them for the benefit of the creditors. The Code provides certain specific exemptions that I discuss with my Clients to determine what is best for that Client.

The answer is a qualified yes. Generally speaking, taxes that first became due more than three (3) years prior to the filing of bankruptcy, in which the return has been filed and the taxing agency has assessed the obligation against the taxpayer at least two hundred forty (240) days prior to the filing of the bankruptcy are dischargeable. However, certain types of taxes are not dischargeable in a bankruptcy. Taxes that arise out of a fiduciary relationship, i.e. payroll taxes collected, sales taxes collected, etc. that were not turned over to the taxing agency can not be discharged. Under certain circumstances a Chapter 13 bankruptcy would benefit this type of Client. In a Chapter 13, these taxes can be amortized over sixty (60) months without interest. Offers in Compromise are also another tool used to deal with those type taxes. Dischargeability of taxes is a very time period specific analysis and it is imperative to have exact dates to make sure the taxes are going to treated appropriately

If I don't have pay stubs what do I need to provide as proof of income?

If you don't receive pay stubs you can show profit and loss statements, social security/disability benefits statement, or even a letter from your employer stating your earnings. This depends on everyone's unique employment situation. The best way to thing about proving income is to first think "How do I make my money?" Then all you need to do is provide written proof of that. If you have questions on what is acceptable proof of income in your situation just check with us and we will be more than happy to help.

You must list all of your creditors when you file for bankruptcy. This includes your credit cards, medical bills, personal loans, payday loans, student loans, mortgage, car note, and even loans to family members and friends. All creditors that you owe $0.01 or more have to be included in your bankruptcy. All creditors are listed under the penalty of perjury, so it is important to list them all. If you fail to list a creditor, you may lose your opportunity to discharge the debt. If you forget about some and then need to amend your bankruptcy schedules to add them, provide their name, address, account number, amount that you owe, and the date that the debt was incurred to the office.

There are three main types of debt in bankruptcy. The first category is secured debts. Secured debts are debts that have collateral against the note. Examples of secured debts are your house and car. If you don=t pay your house payment, the creditor will pursue foreclosure. If you don=t make your car payment the creditor will repossess the car. The second category of debt is priority debt. These debts are debts owed to the government. Examples of priority debt are IRS debt and back due child support. These are debts that you typically have to repay, however there is no collateral to take if you do not. It is important that you discuss these debts with your attorney so they can advise you what your repayment responsibility is. The third main category is unsecured debt. Unsecured debts are the other items on your credit like credit cards, medical bills, payday loans, personal loans, etc. In most cases, these debts can be discharged in your bankruptcy. We can also classify debts as to whether they are dischargeable or not dischargeable - Priority debt is not dischargeable, General unsecured debt is usually dischargeable however, one type of unsecured debt that is not discharged in bankruptcy is a student loan. If you have any student loans you should consult with your attorney to see what your options are.

The 341 Meeting of Creditors is a short hearing held in front of you and any creditors that would like to attend. Your attorney will be present to represent you and the Trustee will be there also. Creditors are allowed to attend but typically none show up. The hearing will last roughly 5 to 10 minutes and the Trustee will ask you general questions about the statements and schedules that were filed in your case. You will have previously reviewed and signed all of the documents, so there should be no surprises. Everything that you state in the hearing is on the court's record and is said under the penalty of perjury. The Trustee will also ask what caused you to file this bankruptcy and if you have had any previous cases. All in all, the hearing is short, to the point, and informs the Trustee about your situation.

It is possible to purchase a house or a car while you are in bankruptcy. If you plan on financing the purchase, you may need to get court permission. Permission can be obtained several ways depending on the type of bankruptcy you are in and where you stand in the bankruptcy process. If you are a chapter 7 Debtor, you should wait until your case is discharged.

What happens if I fall behind on my house or car payments while I'm in bankruptcy?

If you fall behind on your payments to a secured creditor while in a bankruptcy, the creditor will file a Motion to Lift Stay. This is a motion requesting that the bankruptcy protection be lifted so they can begin or continue foreclosure or repossession proceedings. If you want to keep the property and you are in a Chapter 13 bankruptcy, typically, we can work out an agreement with the creditor to allow you to keep the property. In a Chapter 7, you will likely have to get the payments caught up prior to the hearing date, or in some cases, have it caught up prior to the discharge of your case.

If your creditors continue to harass you after your bankruptcy is filed you need to give them our name and phone number. Also, get their name and number and provide it to our office. We can then call the creditor and advise them that under the bankruptcy code they are required to stop all collection efforts. If they persist, our office will file a Motion for Sanctions in the bankruptcy court to enforce the automatic stay.

No, a creditor cannot garnish your wages while you are in bankruptcy. The Attorney General can continue to garnish for current child support obligations, but cannot garnish for delinquent support obligations, if those obligations are provided for in your plan. The IRS cannot place liens, levies, or garnishments on you while you are in bankruptcy, in most situations.

Bankruptcy stays on your credit about 7 to 10 years. Although the bankruptcy will stay on your credit, you can start rebuilding your credit once your bankruptcy is discharged. Making current, full payments on debt is one way to start building your credit while you are in the bankruptcy. Once you are out of bankruptcy, make sure that you watch your income to debt ratio and try to not finance more than 40% of your credit limit.

In a Chapter 7 bankruptcy your certificate must be filed with the court within 45 days from the date of your original 341 hearing. We suggest that you take it as soon as possible to prevent any last minute mishap that would prevent you from taking it.

Divorce and/or separation is one of the three main causes of bankruptcy (the other two are job loss and medical emergency). When the spouse you have separated from files bankruptcy, it means they will be relieved of their obligation to pay all dischargeable debts, including community property debts. This can lead to strange results. For example, if they opened a charge account in their own name, never included you as an authorized user, and maybe never even told you about it, the creditor may still be able to collect the debt from you as a community property debt. By filing bankruptcy, you discharge not only your own debts, but debts you are obligated to pay that you do not know about.

Why are creditors on my credit report when they were discharged in bankruptcy?

In some cases, not all creditors are removed from your credit report after your bankruptcy is discharged. This is commonly just an oversight by the creditor or the credit-reporting agency. All you need to do is submit a dispute to the credit-reporting agency and provide a copy of your Discharge Order. The agency will then review your dispute and remove the creditor from your report if your dispute is correct. It is good to wait about 60 days after your case is discharged to review your credit. This allows time for the creditors to be removed without you having to file a dispute.

Contact the law firm of Steven P. Taylor, P.C. today for a free consultation about your specific bankruptcy questions in Central Indiana. Call (317) 271-1111 or (765) 868-0807 for a consultation. Attorney Steven P. Taylor’s practice is focused on consumer bankruptcy law and he possesses the knowledge and experience necessary to guide you through a successful bankruptcy filing

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